What value should Zeta place on Tau NOL

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Problem - Zeta Corporation is interested in acquiring Tau Corporation through a "Type A" reorganization on January 2 of the current year. Zeta is valued at $50,000,000 and generates taxable income of $5,000,000 per year, whereas Tau is valued at $7,000,000 and holds a $1,470,000 NOL with nine years remaining in its carryover period. If Zeta earns a 7% after-tax rate of return and the Federal long- term tax-exempt rate is 3%, what value should Zeta place on Tau's NOL? Construct a spreadsheet to support your solution that includes a present value analysis. Prepare your solution using spreadsheet software such as Microsoft Excel. Use a marginal state and Federal income tax rate of 25%.

 

Reference no: EM132647036

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